Economist's '6-wallet' theory triggers housing debate

Fan Gang, a member of the monetary policy committee of the People's Bank of China, was at the center of public attention due to his "six-wallet" theory for homeownership.

Fan Gang, president of China Development Institute and professor of economics of Peking University, speaks at the session of "The Asian Economy: Systemic Risks & Structural Reforms" during the Boao Forum for Asia Annual Conference 2018 in Boao, south China's Hainan Province, April 9, 2018. [Photo/Xinhua]

In an episode of "China Economic Forum" aired on April 19 by China Central Television, Fan used wallets as a metaphor for funding sources when buying an apartment. He said if a young couple has six "wallets," representing the financial support from the couple's two pairs of parents and four pairs of grandparents, and the funds from the "wallets" can afford the down payment on an apartment, the young couple should use that money to buy an apartment.

He also stressed that whether or not to use the money to buy an apartment depends on many specific factors. For instance, he said, if a young person doesn't have a stable job, renting an apartment is more cost-efficient than buying one.

However, for those who have marriage plans, and whose family members have enough money to help them, Fan believed pooling all their resources to buy an apartment is better.

According to Fan, the aim of reforming the housing market and implementing mortgage policies is to prevent young couples from having to save money for decades to buy an apartment, which is the reality that many prospective homeowners have faced. He advised young people to utilize mortgage policies to get themselves a permanent home.

But after the program was aired, the speech triggered heated public debate about whether it's necessary to use the savings of so many people just to buy an apartment, and about who should be blamed for the current housing shortage.

On Sina Weibo, China's Twitter-like social network, some people agreed with Fan's view. A user nicknamed Dadi Qinxian said: "This is indeed how things work in China. Most young people have to empty their parents' savings to buy an apartment." Another Weibo user nicknamed Dandan Shiguang Rencuotuo said, "Most people are just reluctant to face this reality."

But others felt China's housing prices are growing too fast. A person nicknamed Fuyu Xiaokang said, "It's ridiculous for three generations to save money just to buy one apartment." Kaiko-Dong said, "The government said it would curb the housing price, but it seems to me that the price is still growing up."

Some said they thought the problem lies in people's obsession with owning an apartment. User Mon_Bob said, "It's true that China's housing prices are high, but it's also abnormal for twenty-somethings and thirty-somethings to think that they ought to have an apartment of their own at such a young age."

A few users also argued that there are other choices for prospective homeowners. Gupiao Lunima said: "Why do they stick to living in big cities? Everything will be fine if you work in your hometown." Bayue Yanting Zhiye said: "You can find good jobs in your hometown. Those who are troubled by housing problems are simply not capable of living in big cities." Daini Zhuanmi Daini Feia said, "When I graduate from school, I will rent an apartment, because I don't want to be a mortgage slave."

To curb speculation, local governments rolled out or expanded restrictions on housing purchases and increased the minimum down payment required for a mortgage. For instance, in September, the second-tier cities of Xi'an, Chongqing, Nanchang, Nanning, Changsha, Guiyang, Shijiazhuang and Wuhan tightened housing controls, with most banning home sales within two to three years after purchases. In January, Beijing announced a plan to allocate 1,200 hectares of land for the building of residential houses this year, and more will be added to further develop the city's house rental market.

As a result, housing prices have remained largely stable in major Chinese cities for months, as shown by statistics from the National Bureau of Statistics.

During previous years, rocketing housing prices, especially in major cities, had fueled concerns about asset bubbles.

This year's government work report delivered by Chinese Premier Li Keqiang in March stated that "houses are for living in, not for speculation."

"We will support people in buying homes for personal use, and develop the housing rental market and shared ownership housing," Li said.